Sunday, June 24, 2012

Ontario Employment Law: Contractual Entitlement to Notice and the Question of Mitigation

In Bowes v. Goss Power Products Ltd., decided May 25, 2012, the Court of Appeal for Ontario was faced with an interesting question of law:

Is an employee, who is terminated without cause, required to mitigate his or her loss when entitled to a fix term of notice or pay in lieu of notice?

In the case, the employee, Peter Bowes had entered into a written contract of employment with Goss Power Products Ltd, which provided that he would receive six months' notice or pay in lieu thereof if his employment was terminated without case. The contract was silent as to any duty on his part to mitigate his damages in the event of a termination without cause. As it happened, only two weeks following the date of termination, Mr. Bowes was lucky enough to secure comparable employment at the same salary he had been earning with Goss.  

The employer took the position that even though the contract was silent as to any obligation on Mr. Bowes to mitigate his damages, he had an implied obligation to do so and had effectively mitigated most of his damages by obtaining this new position. Therefore, the employer argued it did not have to pay Mr. Bowes anymore than

In answering "no" to the question set out above, the Court noted that a contractually fixed term of notice is distinguishable from common law reasonable notice where a duty to mitigate is an implied term of the employment relationship. In this regard, Winkler C.J.O. stated:
When parties contract for a specified period of notice or pay in lieu thereof they are choosing to opt out of the common law approach applied in Bardal. In doing so, the parties should not be take as simply attempting to replicate common law reasonable notice.
Winkler C.J.O. continued:
In my view, there is nothing unfair about requiring employers to be explicit if they intend to require an employee to mitigate what would otherwise be fixed or liquidated damages. In fact, what is unfair is for an employer to agree upon a fixed amount of damages, and then, at the point of dismissal, inform the employee that future earnings will be deducted from the fixed amount. 
This decision illustrates that where a contract specifies the period of notice, or pay in lieu thereof, which an employee will be entitled upon a termination on a without cause basis, courts will not presume a term requiring the dismissed employee to mitigate its damages.

If you believe that you have been wrongfully dismissed, please contact a lawyer who can advise you as to your rights and entitlements.

- Robert Tanha, Toronto